How to Secure an Education Loan for Abroad Studies?

Studying abroad can be a wonderful experience, but it also comes with its unique challenges with major ups and downs. For many students, it is not easy to accept a new culture and explore the possibilities that the new place holds for them. But rest assured that this place will bring ample opportunities into the student’s lives.

While the dream may look beautiful, the low-income household face a major setback when they tend to explore and manage the budget for abroad studies. In India itself the majority of households income into the range of middle to upper middle class households with reports showing that annual ranges from 6 to 10 lakhs per annum. To manage all of that, student loans for studying abroad come into the picture. Although finance plays a major role in the study abroad scenario, student loans for studying abroad make it easier for students to fulfil their dreams.

In this article, we will explore and dive deep into the details of how to get an education loan for abroad studies along with the major requirements needed to acquire one for a seamless journey to study abroad. We will cover various topics related to student loans for studying abroad including the application process, eligibility criteria, and required documentation.

Additionally, we will discuss the role of the Indian banks in offering these loans and the ways of having education loans without collateral and co-applicants. Our aim is to equip aspiring students and applicants with all the necessary details to help them secure student loans for studying abroad.

What are student loans for studying abroad?

An education loan is the financial assistance that is provided to students who are not capable of showcasing the complete amount into their bank account during the financial background checks. These student loans for studying abroad are being provided by many banks at very competitive interest rates, which can be repaid after the tenure of your completion of the course. Student loans for studying abroad open up opportunities and access to universities globally and bridge the gap between countries enabling more interconnectedness while studying abroad. 

Types of Education Loans for Studying Abroad

Usually, there are two types of education loans, one is secured and the other one is unsecured. Secured requires the borrower to provide collateral for getting the loan and on the other hand unsecured loans do not necessitate any security deposit at the time of disbursement of loans. To understand education loans without collateral or with collateral and more about the needs of co-applicants in the loan, let’s explore in depth about what exactly are these.

Secured Education Loan

• Borrowers must provide collateral (e.g., house, fixed deposits, or insurance policies).
• Typically offers a lower interest rate.
• Higher likelihood of approval.
• Longer repayment period.
• Allows for borrowing a larger loan amount.
• Repayment is deferred during the study period.
• Approval doesn’t depend on parental income (pick-and-pay system).

Unsecured Education Loans

• This loan does not require collateral.
• Interest rates are generally higher, ranging from 1.5% to 4%.
• Riskier for the bank, making approval more difficult without collateral.
• Typically has a shorter repayment term.
• Some repayments may be needed during the study period.
• Approval largely depends on parental income.

Benefits of Education Loan for Studying Abroad

In order to manage expenses for the student loans for studying abroad. Parents usually tend to look out for the best countries to study abroad and in fact, many people start looking for an opportunity to study abroad after 12th standard itself. While this may bring a financial burden on them, there are instances where student loans for studying abroad simplify the overall process.

In such situations, seeking a student loan from banks or financial institutions, including Non-Banking Financial Companies (NBFCs), becomes essential to study abroad.

A student loan covers the tuition and other educational expenses ensuring that students can focus on their studies without facing financial hurdles.

Here are the key benefits of student loans for studying abroad:

• Financial Flexibility: Education loans allow you to manage tuition and related expenses without significant financial burden.
• Comprehensive Coverage: These loans usually include tuition fees, accommodation, living costs, and offer extensive support to students willing to study abroad.
• Flexible Repayment Terms: Banks provide flexible repayment plans, including moratorium periods, to simplify the repayment process.
• Tax Benefits: Borrowers can enjoy tax deductions, lowering their overall taxable income slab
• Credit Improvement: Timely repayment of a student loan can enhance your credit profile, benefiting future loan applications and building a better credit score.

Investing in education is often regarded as a means to achieve greater long-term returns, making education loans a valuable financial tool.

Eligibility Criteria for Secured Education Loan for Abroad Studies

• Properties must be registered with the Municipal Corporation, Improvement Trust, or Nagar Parishad.
• Agricultural land or farmhouses taxed by the Gram Panchayat or Nagar Panchayat do not meet RBI guidelines.
• Layout and building plans must receive approval from the relevant authorities.
• A comprehensive document chain covering 30 years is typically required, which may not be feasible for all families.
• Banks generally lend 80-85% of the property’s market value.
• Parents should maintain a CIBIL score above 700 and have a strong credit history.

Eligibility Criteria for Unsecured Education Loan for Abroad Studies

• Parents’ annual income should exceed ₹6 lakhs, with no existing liabilities.
• If self-employed, parents must provide income tax returns, balance sheets, profit and loss accounts, and a business registration certificate.
• Parents with unregistered businesses need to register with Udyog Aadhar.
• A CIBIL score of over 700 is required for parents.
• Farmers who have not filed income tax returns may still secure loans of ₹50-60 lakhs if the student has a GRE score of 300 or above.
• Students admitted to universities ranked 150-200 in the QS World Rankings may qualify for unsecured loans of ₹20-40 lakhs, depending on parental income.

Documents Required for Education Loan to Study Abroad

Students are advised to review the list of documents required for student loans for studying abroad, as mentioned below:

• Completed loan application form.
• Passport-sized photographs of both the applicant and co-applicant.
• Photo identification for both, such as a PAN card, driving licence, voter ID, Aadhaar card, or passport.
• Proof of residence for both parties.
• Academic documents, including mark sheets and certificates.
• Standardised test scores (GRE, GMAT, TOEFL, IELTS) relevant to the course.
• Admission letter from the university.
• Income tax returns for the last three years for the co-applicant.
• Proof of income for the co-applicant.
• For collateral, documents such as title deeds and approved building plans are required.

Best Education Loan Providers in India

Many banks and NBFCs offer education loans for studying abroad. Here are some key options:

• HDFC Bank: Provides education loans for abroad studies up to ₹20 lakhs, so students can secure funding even before admission.
• ICICI Bank: Offers loans up to ₹1 crore for foreign courses, with interest rates starting at 9.50% per annum. The maximum amount without collateral is ₹20 lakhs for undergraduate courses and ₹40 lakhs for postgraduate courses.
• State Bank of India (SBI): Offers up to ₹30 lakhs with a 15% margin requirement and flexible repayment terms ranging from 1 to 15 years.
• Axis Bank: Provides loans up to ₹20 lakhs for study abroad, covering various expenses, including living costs, with a 15% margin for loans over ₹4 lakhs.
• Punjab National Bank (PNB): Their PNB Udaan scheme supports students intending to pursue graduate or postgraduate programmes abroad.

Understanding Interest Rates and Fees

• Fixed vs. Floating Rates: Education loans for studying abroad may have fixed or floating interest rates. Fixed rates stay the same while floating rates change with market conditions.
• Processing Fees: Most lenders charge a processing fee for loan applications, which adds to the overall cost.
• Prepayment Options: Some lenders allow early repayment without extra fees. Check your lender’s prepayment policy to save money.

How to Successfully Repay an Education Loan

Here are techniques to successfully repay your education loan for abroad studies:

• Understand the Terms: Review interest rates, repayment periods, and any extra charges carefully.
• Budget Wisely: Create a budget that includes your income, expenses, and loan repayments to enhance your financial planning.
• Consider Part-time Work: Many countries allow students to work part-time. Use some of this income to cover living costs or repay loans.
• Be Aware of Grace Periods: Many student loans have a grace period after graduation when repayments are not required. Knowing this helps you plan better.
• Monitor Your Credit Score: A good credit score can help you secure better loan terms in the future. Keep track of your score and work to improve it.

Crowdfunded Companies as Loan Providers

Several companies focus on funding students, providing loans specifically for those in selected institutions. These loans are given in the local currency of the country where you will study abroad, and repayments must also be made in that currency.

Loan Schemes Offered by Indian Banks for Foreign Education

Here are some notable loan schemes available for students studying abroad:

• SBI Student Loan Scheme: Available for any Indian student with admission to an institute in India or overseas. It features a low interest rate and allows borrowing up to ₹20 lakhs, repayable over up to 15 years. For loans over ₹7.5 lakhs, collateral is required.
• SBI Global ED-VANTAGE Scheme: Tailored for Indian students pursuing full-time courses abroad, allowing access to loans up to ₹1.5 crores with a repayment period of up to 15 years.
• HDFC Bank Education Loan for Foreign Education: This scheme offers a cash credit limit of up to ₹20 lakhs at competitive interest rates, with potential tax benefits.
• Oriental Bank of Commerce Education Loan for Study in India and Abroad: For students continuing their education in India or abroad, with amounts based on tuition fees.

Common Problems and Their Remedies

Here are some common issues and solutions when getting student loans for studying abroad:

• High Interest Rates: Many students face high rates on education loans for abroad studies. Explore different lenders and government schemes for lower rates.
• Delayed Loan Disbursement: Delays can affect timely tuition payments. Regular communication with your lender can help prevent this.
• Financial Management: Managing finances abroad can be challenging. Consider using budgeting apps to track your expenses effectively.

Conclusion

In summary, education loans for studying abroad are a valuable resource for Indian students. If you’re planning to study abroad after 12th, remember that there are practical ways to finance your education, allowing you to focus on your studies rather than financial worries. For solving these queries, MetaFinance comes into play and guides you throughout your study abroad journey, from providing information about the scholarship programs to creating a roadmap for your financial journey, we’ll assist you with everything.

Whether your aspirations lie in the best countries to study abroad like the USA, Canada, Australia, or Europe, securing the right education loan can pave the way for a brighter future. Discover what you can do now to prepare for this exciting experience with an education loan for abroad studies!